Albany on Oil's Hub List

Times Union | April 8, 2014 | Column by Larry Rulison

Rail tanker cars in the Port of Albany on Tuesday Feb. 18, 2014 in Albany, N.Y. Starting in April Irving Oil will only ship crude in the latest DOT-111 cars (CPS-1232), those that meet the newest crash standards. Also, Marketplace last night reported that both CP and CN will charge shippers more for oil in the less-safe, older DOT-111 cars. Obviously, I'll want to see how all of this affects the rail cars coming into the Port of Albany. (Michael P. Farrell/Times Union)

Albany

The Port of Albany has become such a big player in the transportation of crude oil that the owner of the New York Mercantile Exchange is looking at setting up an oil futures market.

Crude oil is bought and sold either on the "spot" or wholesale market, or through futures contracts that trade on commodities exchanges such as the NYMEX.

In the United States, futures contracts of what's known as West Texas Intermediate or light, sweet crude, are an important benchmark for where oil prices are heading.

But the system is almost entirely based on the prices paid at a massive crude oil storage and transportation hub in the small town of Cushing, Okla., a system that has been in place for decades.

But the CME Group in Chicago, which owns the NYMEX, has been looking at setting up new crude oil futures trading that would be based on prices paid at other important hubs in the Gulf of Mexico and on the East Coast — including possibly Albany.

Damon Leavell, a spokesman for CME Group, said that while there are "no immediate plans" for Albany oil futures, it's on the company's radar.

"We are continuing to analyze crude oil logistics as new markets and delivery points develop domestically," Leavall said. "Albany is one market that is developing, and we're watching."

Crude oil futures contracts need an actual point-of-sale so that the contracts are ultimately tied to actual wholesale prices.

Platts, a news publication that follows the energy markets, first reported the potential for Albany crude futures contracts Tuesday. It quoted a top CME executive saying that North Dakota Bakken Shale crude oil being shipped by railroad is bypassing Cushing on its way to East Coast refineries via Albany, a development that has forced the commodities markets to take a fresh look at how prices are set.

Neither of the large oil terminal owners at the Port of Albany have disclosed how much crude oil they are handling on a daily basis, although last year, Global Partners announced a five-year deal with Phillips 66 to move about 50,000 barrels a day from North Dakota to New Jersey through Albany. However, there is currently a ban on new crude oil projects at the Port of Albany pending an investigation into the dangers of Bakken crude, which is believed to be more flammable than other types of crude.

Meanwhile, the largest environmental group in the 6-million-acre Adirondack Park added its voice Tuesday to those concerned about potential safety and environmental risks posed by massive crude oil trains that pass through on the way to Albany's port.

"We are very concerned about the crude oil shipments through the park by rail," saidAdirondack Council Deputy Director Diane Fish. She said about 120 oil tanker cars daily are traveling CP lines, which connect to Canada and run through the Adirondack Park for roughly 100 miles from the town of Peru in Clinton County south to the town of Dresden in Washington County on their way to oil terminals in Albany.

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PAUSE is a grassroots group of individuals who have come together to promote safe, sustainable energy and fight for environmental justice. We engage the greater public to stop the fossil fuel industry’s assault on the people of Albany and our environment.